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Trading Plan: Fundamentals of a Trader's Tool

There are numerous writings discussing Trading Plans. It's not wrong if I attempt to rewrite about this. Why? Because a Trading Plan is one of the keys to success in facing the market. Ah, enough theory, let's put it into practice! Below is a brief overview of a Trading Plan, perhaps readers have encountered it before or simply want to broaden their knowledge. Please have a look!

A Trading Plan is a tool that must be prepared by a trader. Just like when we want to build a house, we need a floor plan. Similarly, when starting a business, we need planning known as a "Business Plan." So, in every step we take, thorough planning is needed to achieve success. It is said that planning is 50% of success. In forex trading as well, to avoid emotional pitfalls and stay focused, we need a tool known as a Trading Plan.

In general, a Trading Plan includes the following:

  1. Philosophy: The underlying thoughts of the Trading Plan, such as your experience finding trading effectiveness on a 15-minute time frame chart or the influence of gold and oil prices on the value of the dollar. It all depends on individual experiences.
  2. Goals: Setting figures for profit targets, transaction targets, or whatever goals you aim to achieve.
  3. Rules: Contains the rules you establish in trading, including when to enter, when to exit, the set stop-loss, and so on.
  4. Research: Materials for your analysis, whether fundamental or technical, and the reliable sources you use.
  5. Trading System: Guidelines for entering both buy and sell positions, setting stop losses, and target points.

The success of a Trading Plan is highly determined by your trading experience. The creation of a Trading Plan should also consider your trading psychology and money management. Simply put, the goal of all traders is just one: to consistently make money from trading the markets. The formula to achieve this is simple: buy when the market rises and sell when it falls, use profit targets larger than stop losses, and use strategies with a success rate of 50%.

However, even though it's that simple, it doesn't mean it's easy. Statistics show that around 70% of traders lose their money, and only about 12% consistently make money. Why? This is due to a lack of trading plans and a lack of discipline to follow the plans made.

By addressing these two issues, traders will also take significant steps to control emotions, set stop losses, and prevent overtrading. By learning to create a quality Trading Plan and trading according to the plan, you can gain greater profits than most other traders.

Why You Should Have a Plan in Trading? Without a plan, trading will be like gambling and trading without direction. A good plan will tell you when to trade, when to exit a trade, and when to exit the market. A good plan will also help you become a confident and consistent trader. Meanwhile, traders without a plan will face greater risks when entering the market because they tend to react to emotions and lack discipline.

In conclusion, a Trading Plan is the key to success in trading. By having a good plan and the discipline to follow it, you will have an advantage over most other traders who only trade based on emotions and feelings.

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